Social Issues / The Bangladesh Garment Industry: Challenges Of The 21st Century

The Bangladesh Garment Industry: Challenges Of The 21st Century

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Autor:  anton  28 March 2011
Tags:  Bangladesh,  Garment,  Industry,  Challenges,  Century
Words: 1875   |   Pages: 8
Views: 1539

The Bangladesh Garment Industry: Challenges of the 21st century

Introduction

Readymade Garment (RMG) Industry occupies a dominant position in the export-manufacturing sector of Bangladesh. The advent of the RMG sector happened during the early 80s in Bangladesh. Since then, due to supportive policies of the Government of Bangladesh (GoB), this industry has experienced a significant growth. In 1988, the export-oriented RMG sector overtook the traditionally dominant jute sector in terms of gross export accruals. And since then this sector has continued to consolidate it predominant position in the export basket of Bangladesh. According to data of 2003-2004 financial year, the export earnings of the RMG sector was 5686.09 million US dollars, which constituted 74.79 percent of total export earnings. The industry, which started with only a few factory units during 1980s, now boasts 4094 factory units employing around 1.5 million workers.

Composition of Production

The garments products of Bangladesh include both knit and woven wear. Share of knitwear in the total production of garment in Bangladesh is steadily increasing over time. At present, knit wear accounts for about 33 percent of the total production. Of the woven wears, high-value products are shirts, jackets, coats, blouses, sportswear and many more casual and fashion apparels. Recent data shows that production of these high value items either decreased over the years or increased at a very nominal rate compared to other basic low value-added items such as trousers or shorts. Thus, product diversification in the Bangladesh garment industry has been rather slow and products are mainly low value-added or low-fashion items. Of all the produced items in 2001-2, around 40 per cent were exported to USA markets and 53 per cent were exported to the EU markets, with Germany being the highest imported or Bangladeshi garments. However, data of 2003-4 shows that exports to EU has increased to 65 per cent, while exports to USA have decreased to 28 per cent. This drop can be attributed to the abolition of Multi-Fibre Agreement, which will be discussed more in detail later in the paper.

Growth and Challenges of the RMG sector

Two of the main reasons for the growth of this industry can be attributed to (a) comparative advantage of cheap labor and (b) tax-free entrance of Bangladeshi garments to the American and European markets. However, at present, the RMG sector in Bangladesh is facing a debacle due to various national and international reasons. Among them, the phasing out of Multi-Fibre Agreement (MFA), which ensured tax-free entrance of Bangladeshi apparels to the US markets, is one of the main ones. Also, due to high inflation and cost of living increasing in Bangladesh, the workers are demanding higher salaries, which in turn are ruining the comparative advantage of cheap labor of Bangladesh over other countries.

The scenario of international trade has changed to a large extent after the phasing out of MFA. Under the trade agreement, Bangladesh got a tax-free quota facility, which created an ensured market for Bangladeshi garments in the world market. But after the phasing out of the MFA, Bangladesh has been thrown into the open market where there is an acute competition among the exporting countries for global market share. However, it also opened up market opportunities leading to export expansion. The realization of the gains from the expanding market opportunities depends on the capabilities of countries to successfully address the needs arising from acute competition among the exporting countries. Thus Bangladesh, whose comparative advantage is its cheap labor, has to turn this comparative advantage into competitive advantage to compete with other countries.

Recommendations to increase competitiveness of the Industry

Increasing the productivity of the labor remains at the core of increasing competitiveness, which in turn depends on level of technological capability, wage incentives, working conditions and skill up gradation. However, even now Bangladesh could not achieve all these elements to improve labor productivity. As a result, productivity of Bangladeshi garment workers is less than that of fellow competing countries.

Thus my primary recommendation is to improve the productivity of the garment workers. To increase the productivity, implementation of all the existing labor laws is necessary. Also, new labor laws should be formulated according to the needs of country’s labor market. The workers have to be made aware of their rights and should be given some support services by the garment factory owners.

Along with increasing the productivity of the workers, the industry as a whole has to be supported by the government by increasing and developing the present infrastructure, i.e. development of backward linkage, improve port facility, improve communication facilities, reduction of custom delays, setting up of export processing zones, etc. to improve the competitiveness of the Bangladesh garment industry.

Increasing Productivity of Workers:

(a) Implementation of Existing laws and formulation of new laws according to the needs of country’s labor market:

Most of the adverse consequences of women’s employment in the export-oriented industries arose from the large-scale labor lawlessness. Therefore, there is a general recommendation to the GoB to devote resources to enforce existing labor laws. Resources should also be devoted to modify existing laws where necessary, and formulation of new laws as necessary. A lot of the workers in the garment industry are of temporary nature. So the existing labor laws don’t encompass them. So new laws should be formulated which takes the migrant workers under its purview. Productivity greatly depends on the occupational safety of garment workers. Measures should be undertaken to improve the implementation of the labor laws regarding occupational safety. Laws regarding working hours, minimum wage, weekly holiday, work environment i.e. ventilation, cleanliness, fire prevention should be strictly implemented by the government.

(b) Raise Awareness among the workers

Laws cannot be enforced if there is no high demand for the same. Most surveys done so far shows that the workers are barely aware of their rights. Most female workers were unaware of maternity leave and most of all the workers did not know about their rights to a weekly holiday. Thus the factory owners could take full advantage of this lack of knowledge. Hence, there is a pressing need for educating the workers about labor laws. Thus the government, with cooperation from manufacturers, should conduct educational programs for their workers. The workers should be educated about their rights. Alongside, the government could also run educational programs for the manufacturers citing the advantages of a safe and congenial working environment.

(c) Provision of Support Services by the Owners

Since most of the garment workers are women, the following support services should be provided to them. Factory owners, government agencies and even non-government agencies can come forward to help in this.

(i.) Transport Services: Existing transport system is not women friendly at all. It is mainly due to the fact that Bangladesh is a highly sex-segregated society and women’s mobility is restricted. So, a bus service only for women should be started so that the women workers can commute to and from their workplace without any hassle. Even factory owners can start a bus service to pick up their workers. It would not be too difficult since most of the workers of a factory tend to live together.

(ii.) Housing Facilities: Similar to transport services, existing housing facilities cannot meet the need of female workers since present housing facilities require a male household head. So the young female workers migrating from the village for work have to take shelter in unhygienic and insecure places. As a result, they are often stressed during their work and it leads to decrease in productivity. Hence, attempt should be made to provide cheap, secure and hygienic housing facilities

(iii.) Health Care Services: Most of the health hazards among the garment workers arise due the owner’s non-compliance of labor laws. However, lack of health care facilities is also greatly responsible for the ill health of the workers employed in the garments industry. Along with absence of medical facilities, lack of leave facilities is also to blame for the workers’ ill health. Sometimes the employers don’t even let the workers out of the factory for a short time for medical purposes. Thus, there is an immediate need to provide medical assistance to the workers at the doorstep of the factory. Factory owners and non-government agencies should set up mini-clinics at factory premises for the workers to avail medical treatment regularly.

(iv.) Training and Education facilities: Most of the garment workers enter the job market without any prior training or education. They mostly learn their trade through on the job training. However, their productivity could be greatly increased if they were given skill training and other necessary education for an industrial worker.

Develop the present Infrastructure:

One of the primary reasons for the Bangladeshi garment industry not to be able to compete with the others is the long lead-time. It is found that it takes about three months for the factory to deliver the products to the US and European markets after getting an order. This is too long a time compared to the other manufacturing countries around the world. Below are few reasons and how to improve them:

(a) Backward Linkage:

Bangladesh still lacks the backward linkage industries, which support the garment industries. There are just not enough textile factories. As a result, Bangladesh has to import its textiles from India, China or Thailand, which takes a long lead-time. Especially since the factories have to place the order for textiles after they receive the order from their European and American buyers. Thus, the government should give incentive to entrepreneurs to set up textile factories, which would reduce this lead-time greatly.

(b) Improving Infrastructure and Communication Services including Port:

Primarily, Bangladesh lacks a proper highway between its capital city Dhaka to its port city Chittagong. As a result, a mere 250 km journey takes up to 10 hours for trucks. And once the products to be exported reach the port, it takes a long time to load them. The port needs badly to be upgraded and modernized to reduce delay in exporting.

(c) Reduce Custom Delay and setting up of Export Processing Zones:

In Bangladesh, custom delay is one of the main hindrances to timely export. The government needs to make exporting much easier. It is found that one has to complete around 40 forms for a product to be exported. This procedure definitely has to be made easier. The government can also think of setting up more Export Processing Zones (EPZ). A few already exist in Bangladesh and exporting products from these zones are much easier. All the custom formalities are done in the zones, and once the container for export is out of the EPZ, its ready to be loaded on a ship.

Conclusion

From my point of view, Bangladesh can easily overcome the present debacle facing its readymade garments industry. Bangladesh has a good rapport with many buyers across the EU and USA. From big companies like GAP and Wal-Mart to smaller European buyers such as H&M have all set up offices in Bangladesh to make the purchasing easier. This means that these companies want to keep sourcing from Bangladesh and see it as a good place to do business. So if the industry can just make the aforementioned changes and keep Bangladesh competitive with other exporting countries, it can hold on to its market share in the global market.



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